Monthly Securities Finance Market Review: August 2023

Mike Norwood

September 2023

EquiLend’s Head of Trading Solutions, Mike Norwood, shares his monthly market review for securities finance with some surprises for August trading. The following data has been measured and derived from EquiLend NGT.

Monthly Trends

August 2023 was a strong month for securities lending trading activity as measured by flow across EquiLend’s NGT platform. While traditionally a slow month, we saw a 15% increase in volumes compared to July with 2,724,846 trades executed (+4% from August 2022) versus $2.41 trillion as volatility returned to levels not seen since late May.

Global Borrowing and Lending

Inflation remains stubbornly high globally coining the term ‘Stagflation’, which has led to some uncertainty as to central bankers’ next steps. This combined with U.S. and Eurozone manufacturing and employment numbers missing expectations and layered on top of continued weakness in the Chinese economic measures weighed on global equity markets. Bond yields were generally up as investment grade debt priced in a less rosy economic environment.

This macro environment generally encourages increased lending activity and we saw increased trade volumes in 28 of 30 active markets. Hong Kong was a particular stand out with 39,808 trades printed (+41% over July) as share prices weakened amidst concerns over the Chinese property sector.

EMEA saw an 11% increase in trade counts as Germany (+13%), Sweden (+8%) and the UK(+11%) all saw elevated demand. Specific to the Irish market, we additionally saw a 10% increase in trade count. Volatility as measured by the V2TX was once again facing speculation around interest rate decisions by the ECB at yesterday’s September rate meeting which resulted in a hike to 4%.

Fixed income activity saw its strongest month ever on NGT representing 26% of total trades (+14% m/m and +20% y/y) on increased demand for both corporate and sovereign debt. Investment grade corporate debt saw double digit increases in all geographic regions while strength in the sovereign space was fueled primarily by U.S. and Canadian issues.

Sectors Focus

Within global equities, NGT’s most in-demand sectors were:

With September’s FED and ECB meetings, comes further rate rises in continued attempts to halt or slow inflation. It remains to be seen how markets will react to such a decision after a hot month.

Follow securities finance trends, trading analysis and commentary with EquiLend’s Monthly Trading Commentary across 2023.

Who We Are

EquiLend is a global financial technology firm offering Trading, Post-Trade, Data & Analytics, RegTech and Platform Solutions for the securities finance industry. EquiLend has offices in North America, EMEA and Asia-Pacific and is regulated in jurisdictions around the globe. The company is Great Place to Work Certified™ in the U.S., UK, Ireland and India and was named Best Post-Trade Service Provider Globally, Best Market Data Provider Globally and awarded for its Diversity & Inclusion in the Securities Finance Times Industry Excellence Awards 2023.